Australian data centre growth and the impacts on the industrial sector​

• Australia is the world's 3rd-largest data centre investment destination, with a $155 billion pipeline creating approximately 400,000 jobs and capacity projected to grow 13-fold to over 16 GW by 2035
• Data centre developers are paying significant land premiums of 20.4% to 182.1% above industrial rates, driving large-lot land values up 9.6% to 16.5% year-over-year in Sydney and Melbourne
• Development feasibility is under severe pressure, with economic rents already 30-103% above market rates and projected to require 48-111% rental premiums above the current market by 2028
• Energy consumption is disproportionate: A single 1 MW data centre uses electricity equivalent to 360 × 20,000 sqm warehouses, with demand forecast to grow 25% annually to 2030 while ~64% of Australia's electricity remains fossil fuel-generated
• Construction-related industrial demand has surged, with sector take-up reaching 177,800 sqm (4.2% of total), the highest proportion since 2013 and nearly double the 10-year average, driven by data centre supply chain requirements

The construction and operation of data centres is creating tangible demand across the industrial sector. Manufacturers, importers, and wholesalers supplying specialised components, from advanced cooling systems to IT cabling infrastructure, are actively seeking warehouse space near major data centre developments. Over the past year, construction sector gross take-up reached 177,800 square metres, representing 4.2% of total gross take-up, which is the highest proportion recorded since 2013 and nearly double the ten-year average (2.2%).

“Emergent demand from digital infrastructure is becoming an important part of the Australian occupier demand story in Australia. This, coupled with the construction sector activity that’s supporting data centre construction, is expected to boost gross take-up over the medium term.”

Nathan Bingham
Head of Logistics and Industrial
Australia & New Zealand

Data centre developers are competing directly with traditional industrial developers for large land parcels, paying premiums of 20.4% to 63.3% above market values in outer suburban locations and up to 182.1% in South Sydney. This competition is driving sharp increases in land values for two-to-five-hectare sites.

These escalating land costs are creating material impacts on development feasibility. Economic rents for modern, industrial warehousing are already 30%-42% above current average prime net face rents across the Sydney market, with the gap between asking and economic rents even more pronounced in other Australian markets (~64%-~102%). 

In JLL Research highest scenario modelling, economic rents could exceed current market rents by over 150% in some markets by 2028 if data centre developers continue to pay a premium for industrial development land.

Beyond land, data centres place extraordinary demands on energy and water resources.  

Energy consumption scale: A single 1 MW data centre consumes electricity equivalent to: 

• 360 × 20,000 sqm warehouses, or 
• 40 × 50,000 sqm shopping centres, or 
• 440 × 10,000 sqm office towers 
  
  

Approximately 64% of Australia's electricity remains fossil fuel-generated, raising critical questions about long-term sustainability and grid capacity. 

Progressive solutions are emerging. On-site renewable power generation, advanced immersion cooling technologies, and government legislation mandating energy efficiency are beginning to address these constraints. Regional locations offering greater land availability and renewable energy resources may become increasingly attractive for both data centre and industrial development.

For industrial investors, developers, and occupiers, adaptation will be essential. The data centre boom presents genuine opportunities through increased occupier demand and potential diversification into digital infrastructure assets. Yet it simultaneously requires careful navigation of intensifying land competition, rising development costs, and evolving infrastructure availability. Success will depend on strategic location planning, sustainability integration, and a clear understanding of how these two sectors will continue to intersect and influence one another in the years ahead.